How To Write a Mortgage Gift Letter

Mortgage Gift Letter: Explained in Plain English

Buying a first home can be a big financial commitment, and many first-time homebuyers rely on the generosity of friends and family to help cover costs like the down payment and closing fees.

When loved ones contribute funds for a home purchase, lenders require clear documentation to confirm that the money is a gift, not a loan.

This is where a mortgage gift letter comes in.

A mortgage gift letter is a signed document from a donor, certifying that the down payment gift funds are provided with no expectation of repayment.

Gifts from friends and family are common ways to help cover home-buying expenses like the down payment and closing costs. Mortgage lenders need assurance that these gifts are not loans, as additional debt could impact mortgage approval.

The mortgage gift letter serves as a straightforward way to confirm that gift funds are not required to be repaid.

How Do You Write a Mortgage Gift Letter?

A mortgage gift letter must contain certain details, including the donor's name and contact information, the gift amount, and specifics about the property being purchased. The letter is written and signed by the donor, though many mortgage lenders provide templates to make the process easier.

A mortgage gift letter typically includes the following information:

• Donor's name and contact details
• Address of the property being purchased
• The relationship between the donor and the buyer
• The gift amount
• The date of the gift transfer
• A statement confirming that the donor does not expect repayment
• Details of the donor's bank, account number, and account type
• The donor's signature

Once the mortgage gift letter is complete, the homebuyer can submit the letter to their mortgage lender as part of the loan documentation process. There is no need for notarization.

Shop mortgage lenders to get specific gift letter requirements before finalizing the document.

Mortgage Gifts by Loan Type

Mortgage gift rules change with the type of loan. For single-family homes, gift funds can often cover the down payment, but the donor’s relationship to the buyer matters. Property type rules also apply.

Conventional Loans and Mortgage Gifts

Conventional loans are the most common for first-time buyers. Gift donors must be related to the buyer by blood, marriage, adoption, or legal guardianship. A spouse, dependent, domestic partner, or fiancé qualifies as well. Friends and unrelated parties cannot provide gift funds.

Eligible gift donors include:

• Spouse
• Children or dependents
• Blood relatives
• Relatives by marriage, adoption, or legal guardianship
• Domestic partner or fiancé/fiancée

Conventional rules also depend on the property type. A single-family home can be purchased with gift funds covering 100 percent of the down payment. A multi-family purchase with less than 20 percent down requires the buyer to contribute at least 5 percent of personal funds. Gift funds are not allowed for investment property down payments.

FHA Loans and Mortgage Gifts

FHA loans accept gift funds from a wider group. Eligible donors include immediate family, close friends, employers, labor unions, and charitable organizations. Extended relatives such as cousins, nieces, and nephews are not permitted.

USDA Loans and Mortgage Gifts

USDA loans offer broad flexibility with gift funds. Donors can be family, friends, or any outside party, as long as they are not involved in the sale of the property. Sellers, real estate agents, and lenders are excluded.

Because USDA loans finance 100 percent of the purchase price, gift funds apply to closing costs rather than a down payment.

VA Loans and Mortgage Gifts

VA loans treat gift funds in much the same way but with their own structure. Any person or organization may provide a gift, provided they have no stake in the transaction. Parties to the sale, including the seller, listing or buyer’s agent, and the lender, cannot contribute.

Like USDA loans, VA loans also finance the entire purchase. Gift funds help with closing costs, making it easier for veterans and service members to reduce upfront expenses.

Mortgage Gift Rules by Loan Type

Mortgage Gift Letter Template

If a mortgage lender does not provide a template for a mortgage gift letter, you can create one using the example below:

To: [Name/Address of Lender]

I/We, [DONOR NAMES], certify that our gift of $[GIFT AMOUNT] to [BUYER] is given without any expectation of repayment, implied or otherwise. Our gift of $[GIFT AMOUNT] is to be applied toward the purchase of:

[HOUSE ADDRESS]

Money Given By: Name: [DONOR NAME] Relationship To Buyer: [RELATIONSHIP] Phone: [PHONE NUMBER] Address: [DONOR ADDRESS]

Money Received By: Name: [BUYER NAME] Phone: [PHONE NUMBER] Address: [DONOR ADDRESS]

Source of Gift Funds: Bank: [BANK NAME] Account Type: [CHECKING/SAVINGS] Account Number: [ACCOUNT NUMBER] Deposited: [DATE DEPOSITED]

Buyer's Signature: ******___****** Date: **__**

Donor's Signature: ******___****** Date: **__**

Upon signing this gift letter, we certify that funds given to the home buyer were not made available by any persons or entities with interests in the sale of the above property, including the seller, real estate agent, lender, or other parties involved in the transaction.

When planning a home-buying timeline, ask gifters to provide a mortgage gift letter after the offer is accepted and before closing on the home.

Once the letter is signed by both the donor and the homebuyer, it can be submitted to the mortgage lender as documentation.